Institutional development and capacity-building

Legacies of good governance and strong institutions partly explain why Finland and the other Nordic countries today rank internationally at the forefront in terms of economic competitiveness, environmental performance, human welfare, transparency and stable growth.

A nation’s raw material endowment can be a curse when it invites corruption, cripples economic diversification and development and incites civil strife. Good governance and policies that promote transparency go a long way towards adding accountability to management of national resources and in creating institutions that support well-regulated markets and equitable wealth distribution. Good governance also fosters a healthy business environment attractive to foreign direct investment. Strong public institutions create the basis for developing public services and encourage the poor to embrace development policies. Indeed, they are often the single most crucial positive force in poverty reduction. The realization of such institutions requires an innovative approach and commitment from all stakeholders.

Management of sub-surface mineral resources is typically the responsibility of governments or designated public agencies that licence operators and collect fees and taxes. The socio-economic impact of the minerals industry, in terms of balance of payments, fiscal effects, generation of surpluses for social investments and long-term development, fundamentally depends on informed government policies and the quality of public institutions. Indirectly, the minerals industry, which is increasingly technology and knowledge-driven, has become heavily reliant on the presence of sound educational systems.

The colonial-era administrative inheritance of many emerging economies cannot provide the necessary platform for a nationally beneficial minerals sector. Institutional development and investment environment must first be properly aligned to make the minerals industry a motor for economic growth and poverty reduction.

Institutional development in the minerals sector is a non-trivial, time-consuming process. It involves more than mere acquisition of new material tools and technologies, requiring changes at all levels: adopting new norms and values, new organizational structures and new conduct and mode of behaviour. Rather than copying from a predefined template, the process needs to be tailored to specific local conditions

Helping mining institutions assure prudent resource development

The development process may comprise:

Analysis of the existing minerals policy, regulatory and fiscal regime. Key features for encouraging investment are clarity of mining and environmental legislation, particularly with respect to security of tenure, access to resources, access to foreign exchange and stable and equitable taxation and even-handed implementation of rules.

Evaluation of institutional performance and capacities. Sector institutions include ministerial and other government departments, with production statistics, accounting and information on revenues distribution, and agencies responsible for mapping, land title and cadastral information, geological surveys, mining environment offices, as well as relevant educational institutions and R&D capacity.

Implementation of new strategies and organizational structures, acquiring new management instruments, improving the information infrastructure, enhancing the capacity for institutional innovation, understanding the contents of effectiveness and efficiency with appropriate indicators and metrics.

Promotion of required changes. Broad interest and participation, enthusiasm and confidence in the process are necessary, taking into consideration any inherent resistance to change and importance of local decision making throughout the process.

Capacity building in institutional and personal capabilities and skills (good governance and professional aspects), judicial and fiscal transparency, how to plan, implement and monitor and manage the transition from the role of reformer to service provider and facilitator, learning mechanisms of consultation of the people, formation of public-private partnerships in attaining objectives and a proactive approach to change.

NGO interaction (professional associations and interest groups): development of the capacities of emerging and the necessary dialogue.

All analysis and suggestions for reform need to be based on international benchmarking and lessons learned from the best practice cases.

Strong institutions are a crucial element of the entire Raw Materials-Based Sustainable Development (RBSD) process. When successfully implemented, this can lead to generic solutions that may be applicable to reform and development in other, non-minerals based industrial sectors. For mining to be truly sustainable, a full life-cycle analysis perspective is required.

GTK, together with its network of collaborative partners, is ready to provide the necessary knowledge and skills (conceptual, analytical, mapping, modelling, negotiation and brokering) required for institutional development interventions.